Activision Blizzard To Retain Dominance In FPS Domain

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ATVI: Activision Blizzard logo
ATVI
Activision Blizzard

The gaming industry managed to surpass last year’s performance, with overwhelming demand for hardware sales. In this scenario, top video game developers focused more on releasing their highly popular titles just before the holiday quarter, which accounts for almost 40% of the annual sales. According to the NPD report for the month of December, the industry generated $3.25 billion in the last calendar month, down from $3.28 billion in December 2013. However, the highlight of the last year was the strong demand for consoles during the entire year that managed to overshadow the lagging software sales. In December, gamers spent $1.31 billion on hardware, down nearly 4% year-over-year (y-o-y). However, the trend continued in the software segment, as the net software sales for December 2014 reached $1.25 billion, down 2% year-over-year. [1] For the entire calendar year of 2014, gamers spent roughly $5.1 billion on physical hardware for video games, up more than 18% y-o-y, offsetting software sales, which were nearly $5.3 billion, down 13% y-o-y. As a result, the total revenue for the industry in the U.S. was up 1% y-o-y. This indicates the strong demand for the new console generations: Microsoft’s Xbox One and Sony’s PlayStation 4.

The first-person shooter (FPS) genre is becoming more and more popular, and Activision Blizzard (NASDAQ: ATVI) has dominated the FPS domain for the last 5 years, primarily driven by the Call of Duty franchise. The company is about to release its annual report for the fiscal 2014 in the first week of February, which will give us a clear idea about the performance of the company’s core titles. Activision went into the holiday period with two new and highly awaited titles: Call of Duty: Advanced Warfare and Destiny.

Our $21 price estimate for Activision Blizzard’s stock is roughly the same as the current market price.

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See our complete analysis of Activision’s stock here

Call of Duty Led The Holiday Quarter

Call of Duty (COD) is a first-person and third-person shooter franchise, with over 10 titles for the consoles, handhelds, and PC, over the last decade. It is one of the best western interactive franchises with over $9 billion of life-to-date revenues and around 150 million units sold to date, as well as accounting for 56% of the total shooter game sales in 2013. In the first half of 2014, Call of Duty: Ghost led the FPS charts with impressive sales figures on next generation consoles – Microsoft (NASDAQ:MSFT) Xbox One and Sony PlayStation 4. However, the company released its new title Call of Duty Advanced Warfare on November 4. Being the most awaited game of the year, it was off to a great start. Call of Duty: Advanced Warfare sold nearly 7.2 million units on all the major platforms in the first week of its release. [2] As of January 3, the title has sold approximately 17.6 million units, leading in the FPS genre. Moreover, the Call of Duty online community is one of the biggest online platforms in the world and its users are increasing day by day.

Already a dominant force in the FPS genre, Activision aims at strengthening its hold over the segment, as Electronic Arts is rapidly climbing up the ladders in this segment with its Titanfall & Battlefield franchises stealing market share from Activision’s Call of Duty. Trefis charts below show our forecasts for the company’s title sales for the two major gaming platforms.

Can Destiny Be The Next Big FPS Franchise?

In September, Activision released a new FPS franchise: Destiny, which is an online FPS game based on a post apocalyptic science fiction theme in a persistent online world. In the gaming world, persistent world refers to a virtual world that continues to exist even after the user is offline and the changes made by the user can be saved. This innovation, generally used in Massively Multiplayer Online Role-Playing Games (MMORPGs), has recently gained popularity among gamers. On September 10, Activision reported that nearly $500 million of the game products have been shipped to retail and third-party stores in just 24 hours, making Destiny the most successful new video game franchise launch of all-time. [3]

Destiny sold nearly 10 million units as of January 3, 2015,  of which 4.44 units were sold in the first week of its release. [4]  Considering it is a new franchise and that it was the 6th highest  title sold globally in 2014, Destiny might just be the next big FPS franchise in the gaming world. With an altogether different storyline, excellent graphics, and new features, the demand for the title is still strong. Activision has always surprised its gamer base with additive features to its most popular games, and they have been well received by the gaming community. In short, Activision is ensuring that it maintains its dominance in the FPS genre, with new and far more addictive titles.

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Notes:
  1. NPD December 2014 report []
  2. Call of Duty: Advanced Warfare global sales, VGChartz []
  3. Activision sells in more than $500 million of Destiny worldwide as of day one []
  4. Destiny global sales, VGChartz []